My previous article 'Want to be Rich? Read this!' evoked huge reader response. Most people wanted to know how to earn 15 per cent returns for 40 years to amass huge wealth. Unfortunately there is no easy and straight answer to this question.

One needs to do proper asset allocation to generate 15 per cent returns over the long term. Proper asset allocation will ensure that in case one investment goes down the other investment will generate good returns to ensure that you get decent returns over the long run.

Still there can be few years when you don't generate high returns which can be compensated by few years of extremely high returns. One needs to understand that there is no sure way to generate exact 15 per cent returns every year.

Here I will consider a few investment options that give high returns and will take a sample portfolio to explain how asset allocation can be done to get decent returns.

Tax saving instruments

Now government has allowed to invest up to Rs 100,000 to get tax rebates. It can be used completely before considering any other investment avenue. One can invest in Public Provident Fund, National Savings Certificate, Provident Fund, Tax Saving Mutual Funds, et cetera. Infrastructure bonds can be avoided due to low returns provided by them.

Stocks may sound very risky to most of the people who try to enter at the peak of the market to make a quick buck. But there is definitely some risk-free way of making money in the stock market without trying to time the market, without applying extra knowledge, without taking undue risk.

If it were so simple to make money in stocks, everyone on earth would be rich. The main reason why people lose money in the market is that most of them don't have patience required to ride through down periods of the stock market. Everyone wants to make a quick buck and exit.

For people with patience and perseverance to go through the market slowdowns, stocks can provide extremely good returns to beef up overall returns on portfolio.

Interested in knowing how attractive returns can be generated from stocks without taking undue risk and without timing stock market. Read 'Everyone ought to and can be rich'.

Property

Property generates about 12-15 per cent returns over the long term. There can be few years when there is no appreciation in property price and there can be few years when property gives extremely good returns. To generate good returns in property one needs to buy during the down periods in a fast growing locality.

The main constraint in property investment is that it requires a huge investment.

Fixed deposits

Investments can be done in either bank fixed deposits or company fixed deposits. Bank fixed deposits can be done easily and provide good liquidity because it can be broken easily with little penalty. Nowadays, lots of banks provide a 'smartsave' facility where extra money is automatically transferred to fixed deposits providing high returns.

If money can be blocked for about one year then fundamentally good companies can be considered for investment. To get more details about company fixed please visit your nearest branch of any financial advisor like Bajaj Capital, et cetera.

Cash

It is most important part of any investment. You should keep cash for various kinds of expenses for the next 6 months or, at most, put it in fixed deposits. Otherwise you may end up selling any of the previously mentioned investments at the bottom of the market when you should be actually investing more.

The aforementioned investment avenues can be considered for generating 15 per cent returns over the long term. I would like to repeat that these will not necessarily generate exact 15 per cent returns every year.

There may be few years when you get just 2 per cent returns and there may be few years when you get 35 per cent returns. But over the long term -- for 15 to 20 years -- it should generate annual return of 15 per cent return.

Hereunder I will explain a sample portfolio with conservative expected returns.

In the examples below, I assume that one invests Rs 100,000. Expected returns for future are taken from average returns for last 30 years, assuming it should generate similar kind of returns for next 30 years.

Investment Avenue

Amount Invested

Expected Return

Total Amount

Tax Saving Instruments

30,000 (20,000 – PPF 10,000 – Tax Saving MF)

12% (Details explained in article above)

33,600

Equity or Diversified Mutual Funds

40,000

22% (Annual return from diversified MFs for 30 yrs)

48,800

Property

10,000

15% (Annual return, rent and appreciation for 30 yrs)

11,500

Fixed Deposit

10,000 (5,000 – Bank FD 5,000 – Company FD)

7%

10,700

Cash

10,000

4%

10,400

Total Amount

100,000

115,000

In the above table one has invested Rs 100,000 in various investments and got Rs 115,000 at the year-end. It resulted in generating 15 per cent annual return. One definitely needs to take calculated risk to get above average returns.

One should understand the risk involved in various investment avenues. One may change the amount allocated to various investments depending on risk profile.

The author works with a software company in Bangalore. The opinions expressed here are personal.